Impairment: IFRS 9 vs US GAAP

Over the next few years, entities that report under IFRS or US GAAP (or both) will adopt new requirements on the accounting for credit losses.

The two sets of requirements are quite different, which is likely to prove a challenge for dual reporters. The impact of different effective dates for both new standards will also have to be managed.

“The two impairment models are conceptually similar in that they are both ‘expected’ rather than ‘incurred’ loss models. However, the measurement objectives, details of the calculation and the scope of the requirements differ.”

Ewa Bialkowska, KPMG in the UK, and Mahesh Narayanasami, KPMG in the US

We compare and contrast some key aspects of the two models.

EBA consults on credit risk and accounting for ECL

You have until 26 October 2016 to respond to the EBA’s consultation paper on credit institutions’ credit risk management practices and accounting for expected credit losses (ECL).

The proposals have been drafted in response to guidance on the same topic issued by the Basel Committee on Banking Supervision in December 2015.

The proposed guidelines aim to ensure sound credit risk management practices associated with the implementation and ongoing application of the accounting for ECL.The proposed guidelines would affect all credit institutions in the EU, regardless of size or complexity. Typically, it is larger credit institutions that respond to EBA consultations. However, in this instance those larger credit institutions will already be focusing on complying with the full Basel Committee guidance. We encourage all affected credit institutions to carefully consider the appropriateness of the proposals in relation to the nature of their operations and respond to the consultation

Disclosures on the impact of Brexit

The UK’s decision to leave the EU may have an impact on many European entities – and, potentially, entities based in other countries. We have looked at 13 large European banks’ 30 June 2016 interim reports to compare their disclosures about the impact of Brexit.

IFRS 9 developments and IASB projects

There’s more news in our regular sections on IFRS 9 Financial Instruments and the IASB’s activities.